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Covid-19: Hong Kong ‘walking a tightrope’ on pandemic response

Stephen MulrenanWednesday 4 May 2022

Until early May, Hong Kong pursued a policy to combat Covid-19 that’s in line with mainland China – a ‘zero-Covid’ policy, later renamed ‘dynamic zero’.

Hong Kong has experienced a fifth wave of Covid-19 infections, reporting more than one million cases and over 6,000 deaths since January. It’s only since the new year that the territory’s mandatory 21-day hotel quarantine period for arrivals has been reduced.

Keith Brandt, Managing Partner of Dentons Hong Kong, has lived in Hong Kong for 37 years but has never seen anything like it. ‘This has been the single most damaging event so far as Hong Kong’s ability to trade with its neighbours,’ he says. ‘Quarantine-free cross-border travel is absolutely critical to its ability to remain not just a hub for Greater China but a regional and international financial hub.’

Winnie Tam SC, Litigation Liaison Officer of the IBA Asia Pacific Regional Forum and Head of Chambers at Des Voeux Chambers, says the Hong Kong government has been walking a tightrope and perhaps erring on the side of caution. ‘It is important for Hong Kong’s Covid-19 policy to be responsive not only to its societal conditions but also to the degree of its exposure to risk from inbound air traffic if it resumes its role as an international air traffic hub,’ she says.

Although the reason given for reducing the quarantine period was because the dominant Omicron variant has a shorter incubation period, government policy had been under increasing pressure since October when several international financial institutions, as well as the Hong Kong Monetary Authority, warned that the city’s status was at risk.

‘Some 15,000 Americans have left Hong Kong over the last few months,’ says Brandt. ‘This is a direct consequence of everything that’s been going on over the last few years – going back to the extradition ordinance, then the protests in 2020, then the introduction of the national security law, and now Covid.’

Some 15,000 Americans have left Hong Kong over the last few months. This is a direct consequence of everything that’s been going on over the last few years

Keith Brandt
Managing Partner, Dentons Hong Kong

While Hong Kong’s dramatically changing landscape has been undermining people’s confidence in the city’s future, so too has the government’s chaotic handling of the pandemic. Nothing signified that more than the information flow around its delayed plan to test the entire 7.4 million population of Hong Kong for Covid. Since the end of March, the plan has remained on pause.

Ben Cooper, Managing Partner of legal search firm Ashford Benjamin, says there was a massive temporary outflow of expats during the expected mass testing period, and also following reports of an 11-month-old boy who had tested positive being separated from his parents.

‘If your kids now get Covid you’re allowed to accompany them to isolation or to hospital,’ says Cooper. ‘Previously you couldn’t do that, and that was why most of the expats I know just got out of Hong Kong or sent their partner out with the kids.’

But Tam says that Hong Kong’s attraction as a financial hub cannot be completely overridden by mere convenience. ‘Opportunities for young people abound in Hong Kong. In my own chambers of 92 practising barristers, at least three young Singaporeans would have been free to commence and continue their legal careers in Singapore, but they chose Hong Kong. They are thriving here, and not for a moment during these difficult times have they considered […] going home.’

The increasing appetite for mainland Chinese businesses to list their companies through Hong Kong rather than the US – due to trade relations – is benefiting the capital markets teams across certain law firms.’

‘The “white shoe” and “magic circle” firms are […] awash with corporate finance work,’ says Brandt. ‘And there’s a huge amount of competition from the mid-tier firms where there is too much talent chasing too little work in that particular niche practice area.’

In addition to capital markets, Cooper says that recruitment in corporate law, banking and finance, litigation and arbitration continue to be busy.

He adds that Hong Kong will gradually see fewer and fewer expat lawyers, but because they don’t have the language skill, which is going to become more important. ‘It’s only in very specialised areas, such as derivatives law, where they may still recruit from the other major financial hubs,’ he says.

Simon Green, Managing Partner of the Hong Kong office of Charles Russell Speechlys (CRS), agrees that Hong Kong’s legal talent will continue to evolve. ‘Certain roles and positions in the legal sector will change, with the inevitable relocation of lawyers or teams. But most firms in Hong Kong recognise that the future is about providing an array of services that reflect and support Hong Kong’s strategic position with mainland China. And, if they get that right, I don’t see there being an exodus of talent in the legal sector in the same way we might have seen in other sectors.’

With international business groups becoming increasingly vocal about their concerns that Hong Kong was not articulating an exit strategy, the government found itself caught in a dilemma between meeting Beijing’s zero-Covid expectations and catering to the interests of foreign investors. Ironically, the highly transmissible Omicron outbreak will enable Hong Kong to finally pursue an alternative path out of Covid to that of the mainland.

‘Hong Kong managed to put itself in the worst possible position by trying to cater to Beijing but failing,’ says Cooper. ‘If they’d catered to Beijing and managed to keep zero-Covid, it’s understandable and justifiable to an extent. The percentage of business between Hong Kong and mainland China is huge. And most businesses confirmed in a survey that they would prefer to see the border open with China than with the rest of the world at the expense of opening with China.’

Instead, with almost half of Hong Kong’s population having already had Covid, the futility of continuing to pursue a ‘dynamic zero’ approach became apparent to all, even Beijing. In addition to halving hotel quarantine and ending a travel ban from nine countries from 1 April, social distancing measures will relax in stages over the next few months. The hope for all is that the further easing of international travel restrictions follows suit.

‘If you read between the lines, you can see that they’re going to adopt a “living with Covid” policy,’ says Cooper. ‘China has already said that “Hong Kong is going to be an experiment for us”, so they’re making it look like they’re the ones driving policy.’

Hong Kong’s future certainly looks brighter than its recent past. Financial Secretary Paul Chan has confirmed that the city will host an international financial forum for up to 200 foreign investors.

The government will also invest more in the technology sector and seize opportunities under the Bay Area project. ‘Hong Kong remains a key international financial hub and I don’t see this changing anytime soon despite the challenges arising from the pandemic,’ says Green.

Hong Kong retained its third-place ranking in the Global Financial Centres Index, published in late March by Z/Yen and the China Development Institute. In the main areas of competitiveness, it ranked in the top four for ‘business environment’, ‘human capital’, ‘infrastructure’ and ‘general reputation’.

‘The Hong Kong government is recognising that this is now a key issue,’ says Green. ‘It is seeing Hong Kong’s connectivity to the rest of the world as being just as important as its connectivity to mainland China, which is great news.’

Image credit: Hong Kong Skyline at night. pigprox/AdobeStock.com

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